"PhoneGap/PhoneGapDelegate.h not found." This line is found in the Classes > AppDelegate.h file.
Also, "PhoneGap.Framework" in Xcode is in red, meaning it is not linked up. An Option-Clean did not fix.
I had successfully done a Build and Run on the first day of upgrading and it worked perfectly. I can't think of any changes I made that would create the above errors.
(These are the steps I took to install Cordova 1.7.0 and ChildBrowser, if anyone's interested:
http://iphonedevlog.wordpress.com/2012/06/05/installing-childbrowser-with-cordovaphonegap-1-7-0/ )